While prices on finished steel in the US are receiving some resistance to higher offers, sources tell SteelOrbis that the overall domestic scrap demand is expected to continue strong across all grades. The export effect, on the other hand, is yet unknown.
Prime grades such as busheling and #1 bundles are in tight supply. While imported pig iron volumes are expected to continue and potentially increase in the US, the supply available along with lead times is not expected to dampen the domestic price of prime scrap grades. One US-based scrap trader stated, "The scrap market will be driven by continued strength in prime grades based on strong demand by flat roll mills, bar mill and pipe mills." The loss of DRI from Nucor this week due to unplanned maintenance is expected to add fuel to an already strong prime grade market.
According to a separate trader, "Many consumers are now melting more shredded and cut scrap grades which will put pressure on availability and consequently pricing in May from the domestic side."
The export effect is presently being viewed as the "wildcard" in the May outlook. At present, the downturn in global scrap prices is being factored as possibly resulting in ex-US origin HMS I/II 80:20 at $265-270/mt CFR Turkey which in turn would result in shredded scrap prices of $270-275/mt CFR Turkey. The possibility of $250-260/mt on HMS I/II 80:20 from the US is being dismissed as unfeasible at the moment due to domestic scrap demand and a potential increase in export scrap demand from other markets.
Per comments from an export trader, the surge in coking coal prices may counter the negative effect from Turkey's potential erosion in import prices as countries such as India and others may increase their purchases of ferrous scrap, thereby limiting the volumes made available by exporters into the US domestic market.
Additionally, a source stated that feedstock prices are an important consideration in the forthcoming negotiations as an additional decline in domestic scrap prices will result in lower feedstock prices at yards, which may affect scrap intake at a time when higher volumes are demanded by mills.